The following is selected information from Mars Corp. Compute net purchases for the month of March.
| | |
| :--------------------- | :------- |
| Inventory, February 28 | $400,043 |
| Inventory, March 31 | 344,787 |
| Purchase discounts | 10,467 |
| Purchase returns and allowances | 23,593 |
| Sales | 298,291 |
| Sales discounts | 30,711 |
| Gross purchases | 120,018 |
Answer (1)
Define net purchases as gross purchases minus purchase discounts and purchase returns and allowances.
Substitute the given values into the equation: Net Purchases = $120,018 - $10,467 - $23,593 - Calculate the net purchases: $120,018 - $10,467 - $23,593 = 85 , 958 − T h e n e tp u rc ha ses f or t h e m o n t h o f M a rc ha re \boxed{ 85,958} .
Explanation
Understanding the Problem We are given the gross purchases, purchase discounts, and purchase returns and allowances for Mars Corp. for the month of March. Our goal is to compute the net purchases for the month.
Defining Net Purchases Net purchases can be found by subtracting purchase discounts and purchase returns and allowances from gross purchases. The formula is:
Net Purchases = Gross Purchases - Purchase Discounts - Purchase Returns and Allowances
Substituting the Values We are given: Gross Purchases = $120,018 Purchase Discounts = $10,467 Purchase Returns and Allowances = $23,593 Substituting these values into the formula, we get: Net Purchases = $120,018 - $10,467 - $23,593
Calculating Net Purchases Now, we perform the subtraction:
Net Purchases = $120,018 - $10,467 - $23,593 = $109,551 - $23,593 = $85,958
Therefore, the net purchases for the month of March are $85,958.
Examples
Understanding net purchases is crucial for businesses to accurately assess their spending on inventory. For example, if a clothing store has gross purchases of $10,000, purchase discounts of $500, and purchase returns of $200, the net purchases would be $10,000 - $500 - $200 = $9,300. This figure provides a more accurate view of the actual cost of goods acquired during the period, which is essential for financial planning and profitability analysis.
